Investment Rating - The report maintains a "stronger than the market" rating for the coal industry, indicating an expected increase in performance relative to the benchmark index [2][15]. Core Insights - The coal production in the first two months of the year continued to show negative growth, with a total output of 763 million tons, down 0.3% year-on-year. Key producing regions such as Shanxi, Inner Mongolia, Shaanxi, and Xinjiang accounted for 82.5% of the total output, with varying growth rates [1]. - Demand for coal has seen a mixed performance, with electricity generation and cement production increasing by 3.3% and 6.8% respectively, while pig iron production decreased by 2.7% [1]. - The Australian government has announced a ban on new coal mine approvals to achieve net-zero emissions, while Indonesia plans to increase its coal production quota for 2026 to capitalize on rising global prices [1]. - Despite a weak demand from power plants, coal prices have shown resilience, with Qinhuangdao coal prices rising to 731 RMB/ton, reflecting an increase of 58 RMB/ton year-on-year [1]. - The report highlights that the profitability of coking coal is supported by high prices of chemical products, leading to increased production activity among coking enterprises [9]. Summary by Sections Production and Demand - National raw coal production for January-February was 763 million tons, with a year-on-year decrease of 0.3%. Key regions showed varied performance, with Shanxi down 2%, Inner Mongolia up 0.9%, Shaanxi up 6.2%, and Xinjiang down 4.3% [1]. - Coking coal production in the same period was 82.55 million tons, up 1.1% year-on-year, indicating a slight recovery in the sector [9]. Price Trends - As of March 20, coal prices have fluctuated, with Qinhuangdao coal prices reaching 731 RMB/ton, showing a year-on-year increase of 8.6% [1]. - Coking coal prices at Jingtang Port rose to 1620 RMB/ton, reflecting a significant increase of 17.4% year-on-year [9]. Market Dynamics - The report notes that while electricity demand is relatively weak, speculative demand from end-users and the need for inventory replenishment have supported coal prices [1]. - The report suggests that the coal market may experience a "not-so-dull" off-season due to ongoing overseas disruptions and domestic supply-side optimizations [10].

Group 1 - The report highlights that the intensity of AI investment in the US is high, but the sustainability of marginal returns is questionable. There is a possibility of external pressure being transferred to maintain the expansion path until a systemic correction occurs in the related bubble [2][3] - The process of maintaining AI valuations in the US may create a siphoning effect on global sovereign wealth, exacerbating the fragility of the global financial system. If energy prices continue to rise, the probability of the Federal Reserve restarting the interest rate hike cycle may increase [3] - In the context of rising global fragility, RMB assets may have relatively outstanding allocation value. It is suggested to focus on the two main lines of the RMB's phase appreciation and rising energy prices, and to conduct structural adjustments in the Chinese market on an annual basis [3] Group 2 - The report expresses a mid-term positive outlook on coal, new energy, agriculture, electricity, oil, and US capital goods related to inflation [3] - For the long term, the report favors insurance, central state-owned enterprises, anti-involution, and Chinese internet companies [3] Group 3 - The report indicates that the Federal Reserve maintains a positive outlook on the resilience of the US economy, raising the GDP growth forecast for 2026 from 2.3% to 2.4%. However, inflation concerns have significantly increased, with the overall PCE inflation forecast for 2026 raised from 2.4% to 2.7% [8][10] - The report notes that the US AI infrastructure expansion is driving capital expenditure growth, but the commercialization process is relatively lagging, raising doubts about the sustainability of marginal capital returns [9]

Market Overview - The A-share market is currently confirming expectation discrepancies amid escalating geopolitical tensions in the Middle East, with the Shanghai Composite Index dropping by 3.38% this week[13] - Daily trading volume averaged 2.21 trillion yuan, a decrease of approximately 287.6 billion yuan compared to the previous week[13] Historical Resilience - Since 2020, A-shares have shown strong resilience against global shocks, with negative impacts typically concluding within a week[19] - Historical data indicates that after significant external shocks, A-share indices have generally recovered to pre-shock levels within one month, with a recovery probability of approximately 68.8% since 2020[24] Investment Strategy - During periods of external shocks, it is advisable to reduce positions and manage risks, with a focus on cash holdings to capture excess returns when market conditions stabilize[19] - In the rebound phase, sectors with strong policy support and supply-demand dynamics are expected to outperform, particularly in energy security and AI-related industries[6] Sector Allocation - Dividend-paying stocks are favored during adjustment periods, although they are not absolute safe havens; they still exhibit risk characteristics[27] - Key sectors during the current geopolitical tensions include coal, photovoltaic, hydropower, and energy storage, which are expected to benefit from rising industrial demand[33] Risk Considerations - Potential risks include unexpected macroeconomic policy changes and escalations in geopolitical tensions, which could impact market stability[44]

Investment Rating - The report maintains a "Positive" outlook for the coal industry [5] Core Viewpoints - The report is optimistic about the rebound in coking coal prices, driven by potential supply constraints due to policy shifts favoring thermal coal [2][8] - The short-term fundamentals are expected to drive a rebound in coking coal prices, which have greater upward potential compared to thermal coal prices [3][56] Summary by Sections Investment Recommendations and Targets - In light of escalating conflicts between the US and Iran, the coal sector is expected to exhibit upward elasticity. Thermal coal, being a vital resource, may face price increases that could be constrained by policy measures. If policies prioritize thermal coal supply, coking coal supply may tighten, leading to a rapid shift in supply-demand dynamics. The report recommends increasing positions in Pingmei Shenma (601666), Huaibei Mining (600985), Shanxi Coking Coal (000983), and Lu'an Environmental Energy (601699) [3][56] Industry Fundamentals - **Thermal Coal Prices**: Domestic port coal prices have stopped declining, with the price of 5500 kcal thermal coal rebounding from a low of 725 CNY/ton to 731 CNY/ton as of March 20 [8] - **Coking Coal Prices**: As of March 20, the price of low-sulfur coking coal in Liulin was 1444 CNY/ton, showing a slight decrease, while Australian hard coking coal was priced at 245 USD/ton, reflecting a slight increase [8] - **Supply and Demand**: The operating rates of thermal and coking coal mines are in line with seasonal trends. The average daily iron output from 247 steel mills increased by 3.1% week-on-week, indicating a recovery in demand [23][24] - **Inventory Levels**: Coking plant inventories have increased, while steel mill inventories have slightly decreased. As of March 20, independent coking plants held 8.47 million tons of coking coal, a 4.0% increase week-on-week [28] Shipping and Transportation - The CBCFI coal shipping price index has significantly risen, although the number of anchored vessels remains low, indicating ongoing logistical challenges in the coal supply chain [48][51] Market Performance - The coal sector has outperformed the broader market, with notable gains from companies like Shaanxi Coal and Chemical Industry [53]

Liquidity Data - The U.S. Dollar Index fell 1% from above 100 to 99.5[2] - Brent crude oil prices reached $104.4 per barrel[10] - Spot gold prices declined by 10.5% for the week, while silver dropped by 15.7%[10] - The 10-year U.S. Treasury yield rose sharply by 9.5 basis points to 4.37%[12] Selected Research Highlights - Oil prices surged past $105 per barrel due to transit disruptions in the Strait of Hormuz[31] - The geopolitical tensions have led to a re-evaluation of the strategic value of the Western nuclear power supply chain[31] - The U.S. consumer sector is facing stagflation risks as oil prices rise and employment data falls short of expectations[38] - Qatar's LNG exports have significantly decreased, contributing to high natural gas prices[57]

1. Report Industry Investment Rating - The industry rating is "Overweight", indicating an expected increase of over 10% in the industry index relative to the benchmark index in the next 6 - 12 months [24] 2. Core Viewpoints of the Report - The current market is at a moment of heavy divergence. The ChiNext Index has rebounded and hit a new high this week, while overseas liquidity shocks are accelerating. The A - share market is also discussing issues such as "who is the marginal seller" and the potential "redemption - selling - redemption" negative feedback [1][4] - Seasonal effects are not the reason for the decline but help clear risks. The pressure on the liability side from the liquidity shock has been gradually digested in the past two weeks and may be nearing the end [1][5] - Sentiment indicators show that the market is close to the "extreme panic" level, and the smooth passing of the "end - of - the - world options" day implies a high probability of a market reversal [1][6] - Chinese assets have shown strong resilience. A - shares and Hong Kong stocks have smaller declines compared to global markets, and foreign capital is actively increasing its positions in A - shares [1][8] - After the liquidity shock eases, the leading sectors in the A - share market are divided into two categories: hot sectors supported by industrial trends or policy benefits, and liquidity - sensitive elastic sectors [1][14] - The current is a window period for bottom confirmation, and the main lines of the rebound after the shock are becoming clear, including "wrongly - killed" elastic sectors, energy - substitution sectors, and sectors benefiting from rising oil prices [1][22] 3. Summary According to the Table of Contents Introduction: Believe in the Long - Term or Worry about the Short - Term - This week, the market was volatile. The ChiNext Index rose 1.3% and the Shanghai Composite Index fell 3.4%. Globally, except for oil, risk and safe - haven assets declined. The A - share market discussed issues like "who is the marginal seller" and the "redemption - selling - redemption" negative feedback [4] - The seasonal effect promotes risk clearance. The pressure on the liability side from the liquidity shock has been digested, and the yields of various funds this year are better than those in 2025 [5] - Sentiment indicators show that the market is in an "extreme panic" state [6] I. Value the Resilience of Chinese Assets under Liquidity Shocks - Since the Iran - US conflict, global assets have declined, but Chinese assets have advantages. A - shares and Hong Kong stocks have smaller declines, and Hong Kong stocks rebounded first on March 6, followed by the ChiNext Index [8] - Northbound funds are flowing into A - shares. Their trading volume ratio has increased, and they have become an important marginal pricing force. Northbound heavy - position stocks and the 20 most actively traded stocks have shown significant excess returns [9][11] III. "End - of - the - World Options" Usually Accompany Excessive Emotional Release, with a High Probability of Subsequent Reversal - The options expiration day is an important time for emotional release. After the stock index futures and options expiration day, the probability of a market reversal is high, with a trend reversal probability of over 71% [13] IV. Learn from History: Which Sectors Have the Strongest Recovery Ability after the Shock Eases - After the shocks in March 2020 and April 2025, the leading sectors in the A - share market can be divided into two categories: hot sectors with industrial trends or policy support, and liquidity - sensitive elastic sectors [14] - In March 2020, the main line of the A - share rebound was the consumer sector and cyclical + technology elastic sectors [14] - In April 2025, after the "reciprocal tariff" shock, the leading sectors included electronics, computer, communication, and other sectors, and the rebound amplitude of other sectors was positively correlated with valuation elasticity and previous declines [16] V. Main Lines after Risk Release: Who is "Wrongly - Killed" and Who is "Benefiting" - During this round of liquidity shock, the decline of A - share sectors is negatively correlated with valuation elasticity [18] - The AI hardware industry chain has been "wrongly - killed" and has strong support. If oil prices remain high, energy - substitution sectors such as coal, coal chemical industry, and power will benefit. However, new - energy vehicles and electrolytic aluminum have weak performance, possibly due to deflation concerns [20] - The industry layout ideas are: "wrongly - killed" elastic sectors such as the AI hardware industry chain; energy - substitution sectors such as power, wind power, energy storage, and electrolytic aluminum if oil prices fluctuate at a high level; and coal and coal chemical industries if oil prices rise further [22]

Core Insights - The report emphasizes that the Russia-Ukraine conflict has significantly impacted global inflation and economic conditions, extending the duration of high inflation rather than initiating a new round of global reflation [5] - The liquidity environment has tightened due to the conflict, increasing pressure on monetary policy across major economies, which has affected asset pricing through interest rates and stock market performance [5] - The report suggests a "HALO PLUS" strategy for asset allocation, focusing on defensive cash flow and offensive low-crowding growth sectors, particularly in coal, utilities, and construction for defense, while targeting commercial aerospace, batteries, and military themes for growth [6] Group 1: Impact of the Russia-Ukraine Conflict - The conflict has pushed inflation in Europe and the U.S. from around 6% to approximately 10% over six months, maintaining a high inflation rate of over 3% for nearly two years [19][20] - Japan's inflation, initially low, has risen due to energy price shocks, with CPI remaining above 2% for an extended period, indicating a different inflationary dynamic compared to the U.S. and Europe [20] - China's CPI has been less affected, primarily driven by structural price disturbances rather than a sustained inflationary trend [20] Group 2: Historical Inflation Experiences - Historical periods of stagflation in China, such as from June 2007 to February 2008 and January 2010 to July 2011, show that early stagflation phases are characterized by high commodity prices and resilient growth, with a shift to valuation and earnings certainty logic as tightening occurs [11][14] - In the 2007-2008 period, upstream cyclical sectors significantly outperformed, with coal prices rising by 49%, chemicals by 46%, and non-ferrous metals by 44%, reflecting strong demand and price increases [15][16] - The 2010-2011 period saw a market shift where defensive consumption sectors and small-cap growth stocks outperformed as inflationary pressures peaked and monetary tightening began [17][18]

Group 1 - The market is still confirming the expectation gap regarding the ongoing Middle East conflict, which has expanded in intensity and scope, affecting energy facilities, shipping, and regional political structures [4][13][14] - Since 2020, A-shares have shown resilience against global public events, with negative impacts typically concluding within a week. During prolonged shocks, the strategy should focus on reducing positions and controlling risks [19][20] - The next significant signal for market recovery is expected to be the convergence of oil price volatility rather than the final price level itself [23][24] Group 2 - In the adjustment phase, dividend stocks are favored, particularly during the late stages of a bear market, where their relative return advantages are amplified. However, dividend assets remain risk assets and may not provide absolute returns [6][27] - Industry performance during external shocks has shown that sectors with independent industrial prosperity perform best. For instance, during the Ukraine conflict, sectors like pharmaceuticals and energy security (coal) excelled, and similar trends are expected in the current Middle East situation [6][32][33] - The investment strategy emphasizes a defensive approach before the next major signal appears, focusing on high-dividend stocks and sectors benefiting from rising industrial demand and energy security [44] Group 3 - Historical analysis indicates that A-shares have become more resilient to external shocks since 2020, with a significant reduction in the duration and magnitude of declines during such events [22][24] - The probability of index recovery after external shocks has increased, with most indices recovering to pre-shock levels within one month, particularly in the current bull market context [25][24] - The report suggests that the current geopolitical risks primarily affect China indirectly, with manageable energy dependencies and a supportive regulatory environment aiding market stability [42][43]

Investment Rating - The investment rating for the coal industry is "Positive" (maintained) [1] Core Views - The coal industry is entering a new upward cycle, with coking coal sector showing resilience at low levels [3] - The price of thermal coal has slightly decreased, with the Qinhuangdao Q5500 thermal coal closing price at 735 CNY/ton as of March 20, reflecting a week-on-week increase of 6 CNY/ton [3] - The report anticipates that the prices of both thermal and coking coal will experience upward elasticity due to improved supply-demand fundamentals and seasonal demand increases [5] Summary by Sections Investment Logic - The prices of thermal and coking coal are at a turning point, with thermal coal being a policy-driven commodity. The price recovery process is expected to follow four stages: repairing central and local long-term contracts, reaching the coal-electricity profit-sharing line, and exceeding the breakeven point for power plants, projected around 750 CNY [4][15] - Coking coal prices are more influenced by supply-demand fundamentals, with target prices based on the ratio of coking coal to thermal coal prices, indicating potential target prices of 1608 CNY, 1680 CNY, 1800 CNY, and 2064 CNY for coking coal [4][15] Investment Recommendations - The report suggests a dual logic of cyclical recovery and stable dividends, with four main lines for stock selection: 1. Cyclical logic: Jin控煤业, 兖矿能源 for thermal coal; 平煤股份, 淮北矿业, 潞安环能 for metallurgical coal 2. Dividend logic: 中国神华, 中煤能源, 陕西煤业 3. Diversified aluminum elasticity: 神火股份, 电投能源 4. Growth logic: 新集能源, 广汇能源 [5][16] Key Market Indicators - The coal index decreased by 2.46% this week, underperforming the CSI 300 index by 0.28 percentage points [8][10] - The average PE ratio for the coal sector is 19.65, ranking it seventh from the bottom among all A-share industries, while the PB ratio is 1.59, ranking eighth from the bottom [29][31]

Investment Rating - The report maintains a "Positive" outlook for the coal industry [5] Core Viewpoints - The report emphasizes the potential for coking coal prices to rebound due to tightening supply conditions, driven by geopolitical tensions and domestic policy shifts favoring thermal coal [2][8] - It highlights that the domestic thermal coal market is a vital resource for livelihoods, and any significant shortages may lead to policy interventions that could restrict coking coal supply [8] - The report notes that recent increases in prices for coal chemical products like methanol may boost demand for coking coal as production rates improve [8] Summary by Relevant Sections Investment Recommendations and Targets - The report suggests that the coal sector will exhibit upward elasticity in response to escalating conflicts, particularly recommending stocks such as Pingmei Shenma (601666, Buy), Huaibei Mining (600985, Buy), Shanxi Coking Coal (000983, Buy), and Lu'an Environmental Energy (601699, Buy) [3][56] Industry Fundamentals - The report indicates that the price of thermal coal at ports has recently stopped declining, with a rebound observed, while international energy prices, including crude oil and natural gas, have surged [9][17] - Coking coal prices have remained stable, with the inventory levels at independent coking plants showing a slight increase, while steel mill inventories have decreased marginally [28][9] - The report notes that the average daily iron output from steel mills has increased by 3.1% week-on-week, indicating a recovery in demand [8][24] Supply and Demand Dynamics - The operational rates of thermal and coking coal mines are in line with seasonal trends, and there is a noted increase in cement production rates [23][22] - The report highlights that the inventory levels of coking coal at coking plants have risen, while steel mill inventories have slightly decreased, suggesting a shift in supply dynamics [28][9] Shipping and Transportation - The CBCFI coal shipping index has seen a significant increase, although the number of anchored vessels remains low, indicating potential logistical challenges [48][51]